FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In Re: CENTURY ALUMINUM

COMPANY SECURITIES LITIGATION,

ERIC PETZSCHKE, individually and on

behalf of all others similarly situated;

STUART WEXLER, lead plaintiff for

the Securities Act claims; CORY

MCCLELLAN; PETER ABRAMS; CHRIS

MCNULTY,

Plaintiffs - Appellants,

v.

CENTURY ALUMINUM COMPANY;

LOGAN W. KRUGER; MICHAEL A.

BLESS; STEVE SCHNEIDER; JOHN C.

FONTAINE; JACK E. THOMPSON;

PETER C. JONE; JOHN P. O’BRIEN;

WILLY R. STROTHOTTE; JARL

BERNTZEN; CREDIT SUISSE

SECURITIES (USA) LLC; MORGAN

STANLEY & CO.,

Defendants - Appellees.

No. 11-15599

D.C. No.

3:09-cv-01001-

SI

OPINION

Appeal from the United States District Court

for the Northern District of California

Susan Illston, District Judge, Presiding
2 IN RE: CENTURY ALUMINUM CO.

 The Honorable James K. Singleton, Senior United States District Judge *

for the District of Alaska, sitting by designation.

 This summary constitutes no part of the opinion of the court. It has

**

been prepared by court staff for the convenience of the reader.

Argued and Submitted

August 8, 2012–San Francisco, California

Filed January 2, 2013

Before: Consuelo M. Callahan and Paul J. Watford, Circuit

Judges, and James K. Singleton, Senior District Judge.*

Opinion by Judge Watford

SUMMARY

**

Securities Fraud

The panel affirmed the dismissal for lack of statutory

standing of an action under § 11 of the Securities Act of

1933, alleging that a company’s securities were issued under

a materially false or misleading registration statement.

The panel held that the plaintiffs did not adequately allege

that their aftermarket shares were traceable to a secondary

offering in connection with which the company issued a

prospectus supplement treated as part of the company’s

registration statement. The panel held that the plaintiffs’

allegations did not give rise to a reasonable inference that

their shares were traceable to the secondary offering because
IN RE: CENTURY ALUMINUM CO. 3

the allegations also were consistent with the shares having

come from a previously issued pool.

The panel stated that the district court should have

addressed defendants’ motion to dismiss under Federal Rule

of Civil Procedure 12(b)(6), rather than Rule 12(b)(1),

because failure to allege statutory standing results in failure

to state a claim on which relief can be granted, not the

absence of subject matter jurisdiction. The panel affirmed on

the basis that dismissal was proper under Rule 12(b)(6).

COUNSEL

Francis M. Gregorek, BetsyC. Manifold, Rachele R. Rickert,

and Patrick M. Moran (argued), Wolf Haldenstein Adler

Freeman & Herz LLP, San Diego, California, for PlaintiffsAppellants.

Bruce A. Ericson, Kevin M. Fong, and Jeffrey S. Jacobi,

Pillsbury Winthrop Shaw Pittman LLP, San Francisco,

California, for Defendants-Appellees Century Aluminum

Company, Logan W. Kruger, John C. Fontaine, Jack E.

Thompson, Peter C. Jones, John P. O’Brien, Willy R.

Strothotte, Jarl Berntzen, Robert E. Fishman, Catherine Z.

Manning, Steve Schneider and Michael A. Bless.

Robert P. Varian (argued) and Stephen M. Knaster, Orrick

Herrington & Sutcliffe LLP, San Francisco, California, for

Defendants-Appellees Credit Suisse Securities (USA) LLC

and Morgan Stanley & Co. LLC.
4 IN RE: CENTURY ALUMINUM CO.

 Section 11 provides in relevant part: 1

In case any part of the registration statement, when

such part became effective, contained an untrue

OPINION

WATFORD, Circuit Judge:

Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k,

provides a cause of action to any person who buys a security

issued under a materially false or misleading registration

statement. Plaintiffs need not have purchased shares in the

offering made under the misleading registration statement;

those who purchased shares in the aftermarket have standing

to sue provided they can trace their shares back to the

relevant offering. Hertzberg v. Dignity Partners, Inc.,

191 F.3d 1076, 1080 (9th Cir. 1999); Lee v. Ernst & Young,

LLP, 294 F.3d 969, 978 (8th Cir. 2002). When all of a

company’s shares have been issued in a single offering under

the same registration statement, this “tracing” requirement

generally poses no obstacle. Hertzberg, 191 F.3d at 1082.

But when a company has issued shares under more than one

registration statement, the plaintiff must prove that her shares

were issued under the allegedly false or misleading

registration statement, rather than some other registration

statement. Id. at 1080 n.4.

This case involves the latter scenario. Plaintiffs

purchased shares in defendant Century Aluminum Company

at the end of January 2009. In March 2009, shortly after

Century Aluminum restated its cash flows from operating

activities, plaintiffs sued the company (and others) under

§ 11. Plaintiffs allege that the shares they purchased were 1
IN RE: CENTURY ALUMINUM CO. 5

statement of a material fact or omitted to state a

material fact required to be stated therein or necessary

to make the statements therein not misleading, any

person acquiring such security (unless it is proved that

at the time of such acquisition he knew of such untruth

or omission) may, either at law or in equity, in any

court of competent jurisdiction, sue [specified

defendants].

15 U.S.C. § 77k(a).

issued under a materially false and misleading prospectus

supplement dated January 28, 2009, which is treated as part

of the company’s registration statement for purposes of § 11.

Century Aluminum issued the prospectus supplement in

connection with a secondary offering of 24.5 million shares

of the company’s common stock. When the secondary

offering commenced, more than 49 million shares of Century

Aluminum common stock were already in the market. To

prevail, plaintiffs would need to prove that the shares they

purchased came from the pool of shares issued in the

secondary offering, rather than from the pool of previously

issued shares.

Plaintiffs could satisfy this requirement in one of two

ways. First, plaintiffs could prove that they purchased their

shares directly in the secondary offering itself. Such proof

would obviously eliminate any questions about the lineage of

plaintiffs’ shares. Plaintiffs are not arguing here, however,

that they bought directly in the secondary offering; they

concede that they purchased in the aftermarket. (The Third

Amended Complaint acknowledges that plaintiffs did not buy

their shares directly from the underwriters, and none of the

plaintiffs bought shares at the offering price of $4.50 per

share.)
6 IN RE: CENTURY ALUMINUM CO.

 See, e.g., In re Wachovia Equity Sec. Litig., 753 F. Supp. 2d 326, 2

372–73 (S.D.N.Y. 2011); In re Royal Ahold N.V. Sec. & ERISA Litig.,

351 F. Supp. 2d 334, 401 (D. Md. 2004); In re SeeBeyond Techs. Corp.

Sec. Litig., 266 F. Supp. 2d 1150, 1171–72 (C.D. Cal. 2003).

Second, plaintiffs could prove that their shares, although

purchased in the aftermarket, can be traced back to the

secondary offering. See Joseph v. Wiles, 223 F.3d 1155,

1159 (10th Cir. 2000). That is easier said than done. It

would require plaintiffs to trace the chain of title for their

shares back to the secondary offering, starting with their own

purchases and ending with someone who bought directly in

the secondary offering. Courts have long noted that tracing

shares in this fashion is “often impossible,” because “most

trading is done through brokers who neither know nor care

whether they are getting newly registered or old shares,” and

“many brokerage houses do not identify specific shares with

particular accounts but instead treat the account as having an

undivided interest in the house’s position.” Barnes v.

Osofsky, 373 F.2d 269, 271–72 (2d Cir. 1967). Though

difficult to meet in some circumstances, this tracing

requirement is the condition Congress has imposed for

granting access to the “relaxed liability requirements” § 11

affords. Abbey v. Computer Memories, Inc., 634 F. Supp.

870, 875 (N.D. Cal. 1986); see Krim v. pcOrder.com, Inc.,

402 F.3d 489, 496 (5th Cir. 2005).

The question raised by this appeal is whether plaintiffs

have adequately alleged that their shares are traceable to the

secondary offering. Plaintiffs argue that it was enough for

them to allege, without more, that they “purchased Century

Aluminum common stock directly traceable to the

Company’s Secondary Offering.” Some district courts have

held that this allegation suffices, and before Bell Atlantic

2
IN RE: CENTURY ALUMINUM CO. 7

Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v.

Iqbal, 556 U.S. 662 (2009), it probably did. But Iqbal and

Twombly moved us away from a system of pure notice

pleading. See 5 Charles Alan Wright et al., Federal Practice

and Procedure § 1216, at 71 (Supp. 2012). In addition to

providing fair notice, the complaint’s allegations must now

suggest that the claim has at least a plausible chance of

success. As Iqbal put it, the complaint must allege “factual

content that allows the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged.”

Iqbal, 556 U.S. at 678.

The level of factual specificity needed to satisfy this

pleading requirement will vary depending on the context.

Robbins v. Oklahoma, 519 F.3d 1242, 1248 (10th Cir. 2008).

For example, alleging that the plaintiff’s shares are “directly

traceable” to the offering in question might well suffice, even

without “further factual enhancement,” Twombly, 550 U.S. at

557, when all of the company’sshares were issued in a single

offering under a single registration statement. See Joseph,

223 F.3d at 1160. In that context, alleging that the plaintiff’s

shares are directly traceable to the offering in question states

a claim “that is plausible on its face.” Twombly, 550 U.S. at

570. No further factual enhancement is needed because by

definition all of the company’s shares will be directly

traceable to the offering in question. See DeMaria v.

Andersen, 318 F.3d 170, 176 (2d Cir. 2003).

When a company has issued shares in multiple offerings

under more than one registration statement, however, a

greater level of factual specificity will be needed before a

court can reasonably infer that shares purchased in the

aftermarket are traceable to a particular offering. Making this

determination is “a context-specific task that requires the
8 IN RE: CENTURY ALUMINUM CO.

reviewing court to draw on its judicial experience and

common sense.” Iqbal, 556 U.S. at 679. As noted earlier,

experience and common sense tell us that when a company

has offered shares under more than one registration statement,

aftermarket purchasers usually will not be able to trace their

shares back to a particular offering. Thus, in this case,

plaintiffs had to allege facts from which we can reasonably

infer that their situation is different. Standing alone, the

conclusory allegation that plaintiffs “purchased Century

Aluminum common stock directly traceable to the

Company’s Secondary Offering” does not allow us to draw a

reasonable inference about anything because it is devoid of

factual content.

Plaintiffs say they have offered further factual specificity,

and point to allegations regarding the dates on which and the

prices at which they purchased their shares, as well as

allegations concerning the trading volume of Century

Aluminum stock on certain dates. For example, one of the

plaintiffs allegedly purchased 5,000 shares of Century

Aluminum common stock on January 28, 2009, at $4.56 per

share, and 3,000 shares on January 30, 2009, at $3.56 per

share. (The complaint contains similar allegations for the

other named plaintiffs.) In addition, the complaint alleges a

sharp spike in trading volume and a sharp drop in price of

Century Aluminum’s stock between January 28 and 30, 2009,

movements that occurred, plaintiffs say, because the

underwriters of the secondary offering “began flooding the

market with Century Aluminum common stock that they had

purchased in the Secondary Offering.”

These allegations do not give rise to a reasonable

inference that plaintiffs’ shares are traceable to the secondary

offering. Accepting the allegations as true, plaintiffs’ shares
IN RE: CENTURY ALUMINUM CO. 9

could have come from the secondary offering, but the

“obvious alternative explanation” is that they could instead

have come from the pool of previously issued shares.

Twombly, 550 U.S. at 567. Plaintiffs’ allegations are

consistent with their shares having come from either source.

When faced with two possible explanations, only one of

which can be true and only one of which results in liability,

plaintiffs cannot offer allegations that are “merely consistent

with” their favored explanation but are also consistent with

the alternative explanation. Iqbal, 556 U.S. at 678 (internal

quotation marks omitted). Something more is needed, such

as facts tending to exclude the possibility that the alternative

explanation is true, see Twombly, 550 U.S. at 554, in order to

render plaintiffs’ allegations plausible within the meaning of

Iqbal and Twombly. Here, plaintiffs’ allegations remain stuck

in “neutral territory,” Twombly, 550 U.S. at 557, because they

do not tend to exclude the possibility that their shares came

from the pool of previously issued shares.

Plaintiffs argue that the allegations with respect to at least

one of the named plaintiffs, Peter Abrams, are sufficient to

meet the plausibility standard. As to Abrams, the Third

Amended Complaint alleges that he directed his broker to

purchase Century Aluminum shares in the secondary offering

and that his broker executed the purchase through Citigroup,

which at all relevant times was involved in a joint venture

with Morgan Stanley (one of the underwriters of the

secondary offering) “whereby the two entities were

indistinguishable.” Plaintiffs argue that these allegations

create a reasonable inference that at least Abrams’s shares

came from the secondary offering.

Even accepting these allegations as true, we cannot

reasonably infer that Abrams’s shares are traceable to the
10 IN RE: CENTURY ALUMINUM CO.

secondary offering. The allegations are again consistent with

that possibility, but they are also consistent with Citigroup

having filled the order with previously issued shares it was

holding. Absent something more, such as an allegation that

Citigroup held only shares issued in the secondary offering,

these allegations are insufficient to withstand a motion to

dismiss.

While we do not believe plaintiffs’ allegations are

adequate under Iqbal and Twombly, we agree with plaintiffs

that the district court erred by considering extrinsic evidence

when ruling on defendants’ motion to dismiss. The district

court suggested that it could consider such evidence because

plaintiffs’ failure to plead the traceability of their shares

would deprive them of “standing,” which in turn would

deprive the court of subject matter jurisdiction. Accordingly,

the court appeared to grant defendants’ motion to dismiss

under Rule 12(b)(1) of the Federal Rules of Civil Procedure,

rather than Rule 12(b)(6).

Dismissal for lack of subject matter jurisdiction would

have been appropriate if plaintiffs had not adequately alleged

Article III standing. But that was not the case here. Plaintiffs

alleged that they purchased shares whose value had been

inflated by materially false and misleading statements in the

January 2009 prospectus supplement, and that they suffered

an injury-in-fact when the value of those shares declined after

the truth was revealed. Plaintiffs suffered that alleged injury

whether their shares came from the secondary offering or the

pool of previously issued shares, since false or misleading

statements in the prospectus supplement would likely “affect

the price of shares already issued to almost the same extent as

those of the same class about to be issued.” Barnes, 373 F.2d

at 271. Plaintiffs’ alleged injury was directly traceable to
IN RE: CENTURY ALUMINUM CO. 11

defendants’ conduct (issuance of the allegedly false and

misleading prospectus supplement) and would be redressed

by the relief plaintiffs sought (an award of money damages).

Nothing more was needed to allege Article III standing here.

See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103

(1998); NECA-IBEW Health & Welfare Fund v. Goldman

Sachs & Co., 693 F.3d 145, 158 (2d Cir. 2012); Levine v.

AtriCure, Inc., 594 F. Supp. 2d 471, 476 (S.D.N.Y. 2009).

Plaintiffs’ failure to plead the traceability of their shares

means they lack statutory standing under § 11, but failure to

allege statutory standing results in failure to state a claim on

which relief can be granted, not the absence of subject matter

jurisdiction. Leeson v. Transamerica Disability Income Plan,

671 F.3d 969, 977–78 (9th Cir. 2012); Jewel v. Nat’l Sec.

Agency, 673 F.3d 902, 907 n.4 (9th Cir. 2011). The district

court should therefore have addressed defendants’ motion to

dismiss under Rule 12(b)(6), not Rule 12(b)(1).

Notwithstanding this error, we may affirm if dismissal

was proper under Rule 12(b)(6), see Harris v. Amgen, Inc.,

573 F.3d 728, 732 n.3 (9th Cir. 2009); Cetacean Cmty. v.

Bush, 386 F.3d 1169, 1172–73 (9th Cir. 2004), and here it

was. Even without considering the extrinsic evidence

defendants submitted, plaintiffs’ allegations fall short of what

Iqbal and Twombly require for the reasons given above. The

fact that more than 49 million shares of Century Aluminum

common stock were already in the market at the time of the

secondary offering was not alleged in plaintiffs’ complaint,

but it is a fact not subject to reasonable dispute and was

included in the January 2009 prospectus supplement, which

plaintiffs incorporated into the complaint by reference. The

district court properly took judicial notice of this document

and plaintiffs did not contest its accuracy with respect to the
12 IN RE: CENTURY ALUMINUM CO.

number of shares outstanding at the time of the secondary

offering. That fact could therefore be considered in resolving

defendants’ motion under Rule 12(b)(6). See Tellabs, Inc. v.

Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).

AFFIRMED.